PRINCIPLES OF

MANAGEMENT
SIDRA ARSHAD
STRATEGIC MANAGEMENT
Strategic Management is all about identification and description o
the strategies that managers can carry so as to achieve bette
performance and a competitive advantage for their organization.

STRATEGY
• A plan of action designed to achieve a long term or overall aim
• Strategy is an action that managers take to attain one or more of the
organization’s goals.
STARTEGY
Strategy can also be defined as “A general direction set for the company and its variou
components to achieve a desired state in the future. Strategy results from the detailed strategi
planning process”.
A strategy is all about integrating organizational activities and utilizing and allocating the scarc
resources within the organizational environment so as to meet the present objectives.
While planning a strategy it is essential to consider that decisions are not taken in a vaccum an
that any act taken by a firm is likely to be met by a reaction from those affected, competitors
customers, employees or suppliers.
Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need t
take into consideration the likely or actual behavior of others.
Strategy is the blueprint of decisions in an organization that shows its objectives and goals
reduces the key policies, and plans for achieving these goals, and defines the business th
company is to carry on, the type of economic and human organization it wants to be, and th
contribution it plans to make to its shareholders, customers and society at large.
FEATURES OF STARTEGY
Strategy is Significant because it is not possible to foresee the future. Without a
perfect foresight, the firms must be ready to deal with the uncertain events
which constitute the business environment.
Strategy deals with long term developments rather than routine operations, i.e. it
deals with probability of innovations or new products, new methods of
productions, or new markets to be developed in future.
Strategy is created to take into account the probable behavior of customers and
competitors.
Strategies dealing with employees will predict the employee behavior.
Strategy is a well defined roadmap of an organization. It defines the overall
mission, vision and direction of an organization. The objective of a strategy is to
maximize an organization’s strengths and to minimize the strengths of the
competitors.
Strategy, in short, bridges the gap between “where we are” and “where we
want to be”.
COMPONENTS OF STARTEGY
Strategic Intent
Mission Statement
Vision Statement
Goals and Objectives
COMPONENTS OF STARTEGY
Strategic Intent
An organization’s strategic intent is the purpose that it exists and why it will continue to exist,
providing it maintains a competitive advantage.
Strategic intent gives a picture about what an organization must get into immediately in order to
achieve the company’s vision.
It motivates the people.
It clarifies the vision of the vision of the company.
Strategic intent helps management to emphasize and concentrate on the priorities.
Strategic intent is, nothing but, the influencing of an organization’s resource potential and core
competencies to achieve what at first may seem to be unachievable goals in the competitive
environment.
A well expressed strategic intent should guide/steer the development of strategic intent or the
setting of goals and objectives that require that all of organization’s competencies be controlled
to maximum value.
Strategic intent includes directing organization’s attention on the need of winning; inspiring
people by telling them that the targets are valuable; encouraging individual and team
participation as well as contribution; and utilizing intent to direct allocation of resources.
COMPONENTS OF STARTEGY
Mission Statement
Mission statement is the statement of the role by which an organization intends to serve it’s stakeholders. It
describes why an organization is operating and thus provides a framework within which strategies are
formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e.,
stakeholders) and what makes an organization unique (i.e., reason for existence).
A mission statement differentiates an organization from others by explaining its broad scope of activities, its
products, and technologies it uses to achieve its goals and objectives. It talks about an organization’s presen
(i.e., “about where we are”).
For instance, Microsoft’s mission is to help people and businesses throughout the world to realize their full
potential.
Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as rich people.”
Mission statements always exist at top level of an organization, but may also be made for various
organizational levels. Chief executive plays a significant role in formulation of mission statement. Once the
mission statement is formulated, it serves the organization in long run, but it may become ambiguous with
organizational growth and innovations.
In today’s dynamic and competitive environment, mission may need to be redefined. However, care must be
taken that the redefined mission statement should have original fundamentals/components.
COMPONENTS OF STARTEGY
Mission Statement
Mission statement has three main components- a statement of mission or
vision of the company, a statement of the core values that shape the acts
and behaviour of the employees, and a statement of the goals and
objectives.
Features of a Mission
• Mission must be feasible and attainable. It should be possible to achieve it.
• Mission should be clear enough so that any action can be taken.
• It should be inspiring for the management, staff and society at large.
• It should be precise enough, i.e., it should be neither too broad nor too narrow.
• It should be unique and distinctive to leave an impact in everyone’s mind.
• It should be analytical,i.e., it should analyze the key components of the strategy.
• It should be credible, i.e., all stakeholders should be able to believe it.
COMPONENTS OF STARTEGY
Vision
A vision statement identifies where the organization wants or intends to be in future or where it should be
to best meet the needs of the stakeholders. It describes dreams and aspirations for future.
For instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any
device.” Wal-Mart’s vision is to become worldwide leader in retailing.
A vision is the potential to view things ahead of themselves. It answers the question “where we want to be”
It gives us a reminder about what we attempt to develop. A vision statement is for the organization and it’s
members, unlike the mission statement which is for the customers/clients. It contributes in effective decisio
making as well as effective business planning.
It incorporates a shared understanding about the nature and aim of the organization and utilizes this
understanding to direct and guide the organization towards a better purpose. It describes that on achieving
the mission, how the organizational future would appear to be.
An effective vision statement must have following features-
• It must be unambiguous.
• It must be clear.
• It must harmonize with organization’s culture and values.
• The dreams and aspirations must be rational/realistic.
• Vision statements should be shorter so that they are easier to memorize.
In order to realize the vision, it must be deeply instilled in the organization, being owned and shared by
everyone involved in the organization.
COMPONENTS OF STARTEGY
Goals and Objectives
A goal is a desired future state or objective that an organization tries to achieve. Goals specify in
particular what must be done if an organization is to attain mission or vision. Goals make mission
more prominent and concrete. They co-ordinate and integrate various functional and
departmental areas in an organization. Well made goals have following features-
• These are precise and measurable.
• These look after critical and significant issues.
• These are realistic and challenging.
• These must be achieved within a specific time frame.
• These include both financial as well as non-financial components.
Objectives are defined as goals that organization wants to achieve over a period of time. These
are the foundation of planning. Policies are developed in an organization so as to achieve these
objectives. Formulation of objectives is the task of top level management. Effective objectives
have following features-
• These are not single for an organization, but multiple.
• Objectives should be both short-term as well as long-term.
• Objectives must respond and react to changes in environment, i.e., they must be flexible.
• These must be feasible, realistic and operational.
ASSIGNMENT NO. 2 – 03-10-2023
• Importance of Vision and Mission Statements
• Write Vision and mission statement for yourself
• Hand written
• Due on 05-10-2023
STRATEGIC MANAGEMENT
Strategic management is the management of an organization’s
resources to achieve its goals and objectives.
Strategic management involves
• setting objectives,
• analyzing the competitive environment,
• analyzing the internal organization,
• evaluating strategies,
• and ensuring that management rolls out the strategies across the
organization.
MPORTANCE OF STRATEGIC MANAGEMENT
Helping their company find ways to be more competitive is the
purpose of strategic management.
To that end, putting strategic management plans into practice is the
most important aspect of the planning itself.
Plans in practice involve identifying benchmarks, realigning
resources—financial and human—and putting leadership resources in
place to oversee the creation, sale, and deployment of products and
services.
STRATEGIC MANAGEMENT PROCESS
The strategic management process means defining the organization’s strategy. It is also defined a
the process by which managers make a choice of a set of strategies for the organization that will
enable it to achieve better performance.
Strategic management is a continuous process that appraises the business and industries in which
the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and
future competitor’s and then reassesses each strategy.
Strategic management process has following four steps:
• Environmental Scanning
• Strategy Formulation
• Strategy Implementation
• Strategy Evaluation
The key strategy evaluation activities are: appraising internal and external factors that are the
root of present strategies, measuring performance, and taking remedial/corrective actions.
Evaluation makes sure that the organizational strategy as well as it’s implementation meets the
organizational objectives.
STRATEGIC MANAGEMENT PROCESS
These components are steps that are carried, in chronological order, when
creating a new strategic management plan.
Present businesses that have already created a strategic management plan
will revert to these steps as per the situation’s requirement, so as to make
essential changes.
Components of Strategic Management Process
ENVIRONEMNTAL SCANNING - Internal &
External Analysis of Environment
Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine
development and forecasts of factors that will influence organizational success.
Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships
within an organization’s internal and external environment.
It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing
in the environment.
During strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one
organization may be an opportunity for another.
Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal
organizational environment.
This includes employee interaction with other employees, employee interaction with management, manager interaction with
other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational
structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal
environment.
Analysis of internal environment helps in identifying strengths and weaknesses of an organization.
As business becomes more competitive, and there are rapid changes in the external environment, information from external
environment adds crucial elements to the effectiveness of long-term plans.
As environment is dynamic, it becomes essential to identify competitors’ moves and actions. Organizations have also to update th
core competencies and internal environment as per external environment.
Environmental factors are infinite, hence, organization should be agile and vigile to accept and adjust to the environmental
changes.
ENVIRONEMNTAL SCANNING - Internal &
External Analysis of Environment
For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that are
involved in the product are no more credible, which could imply the requirement for more focused scanning
forecasting and analysis to create a more trustworthy prediction about the input costs. In a similar manner,
there can be changes in factors such as competitor’s activities, technology, market tastes and preferences.
While in external analysis, three correlated environment should be studied and analyzed —
• immediate/industry environment
• national environment
• broader socio-economic environment/macro-environment
Examining the industry environment needs an appraisal of the competitive structure of the organization’s
industry, including the competitive position of a particular organization and it’s main rivals. Also, an
assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating
the effect of globalization on competition within the industry.
Analyzing the national environment needs an appraisal of whether the national framework helps in
achieving competitive advantage in the globalized environment.
Analysis of macro-environment includes exploring macro-economic, social, government, legal, technologica
and international factors that may influence the environment. The analysis of organization’s external
environment reveals opportunities and threats for an organization.
Strategic managers must not only recognize the present state of the environment and their industry but also
be able to predict its future positions.
SWOT ANALYSIS
SWOT Analysis is the most renowned tool for audit and analysis of
the overall strategic position of the business and its environment. Its
key purpose is to identify the strategies that will create a firm specific
business model that will best align an organization’s resources and
capabilities to the requirements of the environment in which the firm
operates.
In other words, it is the foundation for evaluating the internal
potential and limitations and the probable/likely opportunities and
threats from the external environment. It views all positive and
negative factors inside and outside the firm that affect the success.
A consistent study of the environment in which the firm operates
helps in forecasting/predicting the changing trends and also helps in
including them in the decision-making process of the organization.
SWOT ANALYSIS
SWOT ANALYSIS
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-
Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which continued success can b
made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your
employees possess (individually and as a team) and the distinct features that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process
capabilities, financial resources, products and services, customer goodwill and brand loyalty.
Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, etc.
Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses
deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should
meet.
Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision
making, etc. Weaknesses are controllable. They must be minimized and eliminated.
For instance - to overcome obsolete machinery, new machinery can be purchased. Other examples of organizational weaknesses are huge debts, high
employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc.
Opportunities - Opportunities are presented by the environment within which our organization operates. These arise when an organization can take
benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organizations can gain competitive
advantage by making use of opportunities.
Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the
clients while getting desired results is a difficult task.
Opportunities may arise from market, competition, industry/government and technology. Increasing demand for telecommunications accompanied b
deregulation is a great opportunity for new firms to enter telecom sector and compete with existing firms for revenue.
Threats - Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. They
compound the vulnerability when they relate to the weaknesses.
Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest among employees; ever
changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.
SWOT ANALYSIS
Advantages • Limitations
SWOT Analysis is instrumental in strategy formulation and selection. It is a • SWOT Analysis is not free from its limitations. It may cause
strong tool, but it involves a great subjective element. organizations to view circumstances as very simple because of
which the organizations might overlook certain key strategic
It is best when used as a guide, and not as a prescription. Successful contact which may occur. Moreover, categorizing aspects as
businesses build on their strengths, correct their weakness and protect
strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market.
against internal weaknesses and external threats. They also keep a watch on
their overall business environment and recognize and exploit new • SWOT does stress upon the significance of these four aspects, bu
opportunities faster than its competitors. it does not tell how an organization can identify these aspects fo
itself.
SWOT Analysis helps in strategic planning in following manner-
• There are certain limitations of SWOT Analysis which are not in
It is a source of information for strategic planning. control of management. These include-
Builds organization’s strengths. • Price increase;
Reverse its weaknesses. • Inputs/raw materials;
Maximize its response to opportunities. • Government legislation;
Overcome organization’s threats. • Economic environment;

It helps in identifying core competencies of the firm.

• Searching a new market for the product which is not having
overseas market due to import restrictions; etc.
It helps in setting of objectives for strategic planning. • Internal limitations may include-
It helps in knowing past, present and future so that by using past and current • Insufficient research and development facilities;
data, future plans can be chalked out. • Faulty products due to poor quality control;
• Poor industrial relations;
SWOT Analysis provide information that helps in synchronizing the firm’s • Lack of skilled and efficient labour; etc
resources and capabilities with the competitive environment in which the
firm operates.
COMPETITOR ANALYSIS
COMPETITOR ANALYSIS
Competitor analysis begins with identifying present as well as potential competitors. It portrays
an essential appendage to conduct an industry analysis.
An industry analysis gives information regarding probable sources of competition (including all the
possible strategic actions and reactions and effects on profitability for all the organizations
competing in the industry). However, a well-thought competitor analysis permits an organization
to concentrate on those organizations with which it will be in direct competition, and it is
especially important when an organization faces a few potential competitors.
Michael Porter in Porter’s Five Forces Model has assumed that the competitive environment
within an industry depends on five forces:
Threat of new potential entrants,
Threat of substitute product/services,
bargaining power of suppliers,
bargaining power of buyers,
Rivalry among current competitors.
These five forces should be used as a conceptual background for identifying an organization’s
competitive strengths and weaknesses and threats to and opportunities for the organization from
it’s competitive environment.
COMPETITOR ANALYSIS
The main objectives of doing competitor analysis can be summarized as follows:
To study the market;
To predict and forecast organization’s demand and supply;
To formulate strategy;
To increase the market share;
To study the market trend and pattern;
To develop strategy for organizational growth;
When the organization is planning for the diversification and expansion plan;
To study forthcoming trends in the industry;
Understanding the current strategy strengths and weaknesses of a competitor can suggest
opportunities and threats that will merit a response;
Insight into future competitor strategies may help in predicting upcoming threats and
opportunities.
Competitors should be analyzed along various dimensions such as their size, growth and
profitability, reputation, objectives, culture, cost structure, strengths and weaknesses, business
strategies, exit barriers, etc.
STRATEGY FORMATION PROCESS
Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of
organizational goals and objectives and thereby achieving the organizational vision.
The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid
chronological order, however they are very rational and can be easily followed in this order.
Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term objectives of the
organization. It is known that strategy is generally a medium for realization of organizational objectives.
Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there.
Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy
is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.
While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must
be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have
been determined, it is easy to take strategic decisions.
Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial
environment in which the organization operates. This includes a review of the organizations competitive position.
It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of
such a review is to make sure that the factors important for competitive success in the market can be discovered so that
the management can identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses
After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves and actions so as
to discover probable opportunities of threats to its market or supply sources.
STRATEGY FORMATION PROCESS
Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. The idea behind this
is to compare with long term customers, so as to evaluate the contribution that might be
made by various product zones or operating departments.
Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and
accordingly strategic planning is done for each sub-unit. This requires a careful analysis o
macroeconomic trends.
Performance Analysis - Performance analysis includes discovering and analyzing the gap
between the planned or desired performance.
A critical evaluation of the organizations past performance, present condition and the
desired future conditions must be done by the organization.
This critical evaluation identifies the degree of gap that persists between the actual
reality and the long-term aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current trends persist.
Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of
action is actually chosen after considering organizational goals, organizational strengths,
potential and limitations as well as the external opportunities.
PORTER’S FIVE FORCES MODEL OF
COMPETITION
The five forces mentioned beside are
very significant from point of view of
strategy formulation. The potential of
these forces differs from industry to
industry.
These forces jointly determine the
profitability of industry because they
shape the prices which can be
charged, the costs which can be
borne, and the investment required to
compete in the industry.
Before making strategic decisions, the
managers should use the five forces
framework to determine the
competitive structure of industry.
PORTER’S FIVE FORCES MODEL OF
COMPETITION
Michael Porter (Harvard Business School Management Researcher)
designed various vital frameworks for developing an organization’s
strategy. One of the most renowned among managers making strategic
decisions is the five competitive forces model that determines industry
structure. According to Porter, the nature of competition in any industry is
personified in the following five forces:
Threat of new potential entrants
Threat of substitute product/services
Bargaining power of suppliers
Bargaining power of buyers
Rivalry among current competitors
PORTER’S FIVE FORCES MODEL OF COMPETITION
Let’s discuss the five factors of Porter’s model in detail:
Risk of entry by potential competitors: Potential competitors refer to the firms which are not currently
competing in the industry but have the potential to do so if given a choice. Entry of new players increases
the industry capacity, begins a competition for market share and lowers the current costs. The threat of
entry by potential competitors is partially a function of extent of barriers to entry. The various barriers to
entry are-
• Economies of scale
• Brand loyalty
• Government Regulation
• Customer Switching Costs
• Absolute Cost Advantage
• Ease in distribution
• Strong Capital base
Rivalry among current competitors: Rivalry refers to the competitive struggle for market share between
firms in an industry. Extreme rivalry among established firms poses a strong threat to profitability. The
strength of rivalry among established firms within an industry is a function of following factors:
• Extent of exit barriers
• Amount of fixed cost
• Competitive structure of industry
• Presence of global customers
• Absence of switching costs
• Growth Rate of industry
• Demand conditions
PORTER’S FIVE FORCES MODEL OF COMPETITION
Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or the firms who distribute the industry’s
product to the final consumers.
Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase
the firms cost in the industry by demanding better quality and service of product.
Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs. They purchase in large quantities. They
have full information about the product and the market. They emphasize upon quality products. They pose credible threat of backward
integration. In this way, they are regarded as a threat.
Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry.
Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw materials, services, etc
or the costs of industry in other ways.
Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Suppliers products have a few substitutes
Strong suppliers’ products are unique. They have high switching cost. Their product is an important input to buyer’s product. They pose
credible threat of forward integration. Buyers are not significant to strong suppliers. In this way, they are regarded as a threat.
Threat of Substitute products: Substitute products refer to the products having ability of satisfying customers needs effectively. Substitutes
pose a ceiling (upper limit) on the potential returns of an industry by putting a setting a limit on the price that firms can charge for their
product in an industry.
Lesser the number of close substitutes a product has, greater is the opportunity for the firms in industry to raise their product prices and
earn greater profits (other things being equal).
The power of Porter’s five forces varies from industry to industry. Whatever be the industry, these five forces influence the profitability as
they affect the prices, the costs, and the capital investment essential for survival and competition in industry.
This five forces model also help in making strategic decisions as it is used by the managers to determine industry’s competitive structure.
Porter ignored, however, a sixth significant factor- complementaries. This term refers to the reliance that develops between the companies
whose products work is in combination with each other. Strong complementors might have a strong positive effect on the industry.
Also, the five forces model overlooks the role of innovation as well as the significance of individual firm differences. It presents a stagnant
view of competition.
STRATEGY IMPLEMENTATION
Strategy implementation is the translation of chosen strategy into
organizational action so as to achieve strategic goals and objectives.
Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow strategies that lead to
competitive advantage and a better performance.
Organizational structure allocates special value developing tasks and roles
to the employees and states how these tasks and roles can be correlated so
as maximize efficiency, quality, and customer satisfaction-the pillars of
competitive advantage. But, organizational structure is not sufficient in
itself to motivate the employees.
An organizational control system is also required. This control system
equips managers with motivational incentives for employees as well as
feedback on employees and organizational performance. Organizational
culture refers to the specialized collection of values, attitudes, norms and
beliefs shared by organizational members and groups.
STRATEGY IMPLEMENTATION
Following are the main steps in implementing a strategy:
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented.
Also, it is essential to note that strategy implementation is not possible unless
there is stability between strategy and each organizational dimension such as
organizational structure, reward structure, resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an
organization. New power relationships are predicted and achieved. New groups
(formal as well as informal) are formed whose values, attitudes, beliefs and
concerns may not be known. With the change in power and status roles, the
managers and employees may employ confrontation behaviour.
DIFFERENCE
Strategy Formulation Strategy Implementation

ategy Formulation includes planning and decision-making Strategy Implementation involves all those means related to
volved in developing organization’s strategic goals and plans. executing the strategic plans.

short, Strategy Formulation is placing the Forces before the In short, Strategy Implementation is managing forces during the
tion. action.
ategy Formulation is an Entrepreneurial Activity based on Strategic Implementation is mainly an Administrative Task based on
ategic decision-making. strategic and operational decisions.

ategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.

ategy Formulation is a rational process. Strategy Implementation is basically an operational process.

ategy Formulation requires co-ordination among few Strategy Implementation requires co-ordination among many
dividuals. individuals.
ategy Formulation requires a great deal of initiative and logical Strategy Implementation requires specific motivational and
lls. leadership traits.
ategic Formulation precedes Strategy Implementation. Strategy Implementation follows Strategy Formulation.
STRATEGY EVALUATION
Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the
comprehensive plans in achieving the desired results.
The managers can also assess the appropriateness of the current strategy in todays dynamic world with socio-economic, political
and technological innovations. Strategic Evaluation is the final phase of strategic management.
The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments
etc, through control of performance.
Strategic Evaluation is significant because of various factors such as - developing inputs for new strategic planning, the urge for
feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.
The process of Strategy Evaluation consists of following steps-
Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to
set, how to set them and how to express them.
In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing th
main task.
The performance indicator that best identify and express the special requirements might then be determined to be used for
evaluation.
The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative
criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc.
Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility
etc.
STRATEGY EVALUATION
Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared
The reporting and communication system help in measuring the performance.
If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy
evaluation becomes easier. But various factors such as managers contribution are difficult to measure.
Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable
objectives must be created against which measurement of performance can be done.
The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial
statements like - balance sheet, profit and loss account must be prepared on an annual basis.
Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be
variances which must be analyzed.
The strategists must mention the degree of tolerance limits between which the variance between actual and standard
performance may be accepted.
The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is
an issue of concern because it indicates a shortfall in performance.
Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it.
Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action.
If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors
responsible for such performance.
If the strategists discover that the organizational potential does not match with the performance requirements, then the standard
must be lowered.
Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic
management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point
of strategic management process.
LEVELS OF STRATEGY
These three levels are:
• Corporate-level strategy,
• Business-level strategy and
• Functional-level strategy.
Together, these three levels of
strategy can be illustrated in a so called
‘Strategy Pyramid’ (Figure 1).
Corporate strategy is different from
Business strategy and Functional
strategy.
Even though Corporate-level strategy
is at the top of the pyramid, we start
this article by explaining Business-level
strategy first.
LEVELS OF STRATEGY
Corporate-level strategy
At the corporate level strategy however, management must not only consider
how to gain a competitive advantage in each of the line of businesses the firm
is operating in, but also which businesses they should be in in the first place.
It is about selecting an optimal set of businesses and determining how they
should be integrated into a corporate whole: a portfolio. Typically, major
investment and divestment decisions are made at this level by top
management.
Mergers and Acquisitions (M&A) is also an important part of corporate strategy.
This level of strategy is only necessary when the company operates in two or
more business areas through different business units with different business-
level strategies that need to be aligned to form an internally consistent
corporate-level strategy.
That is why corporate strategy is often not seen in small-medium enterprises
(SME’s), but in multinational enterprises (MNE’s) or conglomerates.
LEVELS OF STRATEGY
Business-level strategy
The Business-level strategy is what most people are familiar with and is
about the question “How do we compete?”, “How do we gain (a
sustainable) competitive advantage over rivals?”.
In order to answer these questions it is important to first have a good
understanding of a business and its external environment.
At this level, we can use internal analysis frameworks like the Value Chain
Analysis and the VRIO Model and external analysis frameworks
like Porter’s Five Forces and PESTEL Analysis.
When good strategic analysis has been done, top management can move
on to strategy formulation by using frameworks as the Value
Disciplines, Blue Ocean Strategy and Porter’s Generic Strategies.
In the end, the business-level strategy is aimed at gaining a competitive
advantage by offering true value for customers while being a unique and
hard-to-imitate player within the competitive landscape.
LEVELS OF STRATEGY
Functional-level strategy
Functional-level strategy is concerned with the question “How do we
support the business-level strategy within functional departments, such
as Marketing, HR, Production and R&D?”.
These strategies are often aimed at improving the effectiveness of a
company’s operations within departments. Within these department,
workers often refer to their ‘Marketing Strategy’, ‘Human Resource
Strategy’ or ‘R&D Strategy’.
The goal is to align these strategies as much as possible with the greater
business strategy. If the business strategy is for example aimed at offering
products to students and young adults, the marketing department should
target these people as accurately as possible through their marketing
campaigns by choosing the right (social) media channels.
Technically, these decisions are very operational in nature and are
therefore NOT part of strategy. As a consequence, it is better to call them
tactics instead of strategies.
STRATEGY VS PLANNING
STRATEGY • PLANNING
• Sets long term vision • Sets short-terms goals
• Guides overall direction • Implements strategy
• Developed by top level • Developed by middle/lower level
management management
• Focus on external factors • Focus on internal factors
• Shapes futures • Operates present
• Alligns resources • Allocate resources